Awareness about issuing a delivery challan

What is a delivery challan?

Section 31 of the Central Goods and Service Tax Act, 2017 suggests that a tax invoice should be issued when a registered distributor happens to transport taxable commodities from one place to another. Furthermore, this invoice must consist of details such as the number of commodities, their value, the descriptions of those commodities, the payable tax on them and other details that come under the Section 31 (1) Act.

There are certain instances where the commodities are returned without being sold, therefore, the tax invoices are not issued on those transactions but instead the delivery challans are issued. Delivery challan meaning purveyors use it to issue commodities that are not up for immediate sale.

Difference between an invoice and a delivery challan

An invoice is a document the supplier generates to hand over the authority of the commodity sold to the buyer. The invoice acts as a substantial proof of ownership for the buyer. Delivery challan meaning the goods are not for instant sale, no GST is applied for the commodities as well. Delivery challans contain the details of the goods being transported are also termed as “delivery slip” and “dispatch challan”. For instance, if goods from a factory are being transported from one warehouse to another one, a delivery challan is issued in such cases.

Delivery challan meaning that the buyer has acknowledged the goods’ receipt but does not possess any legal authority or ownership over it. It is also to be noted that an invoice shows the value of the product delivered whereas a delivery challan does not.

Why is a delivery challan needed?

Central Goods and Service Tax Act in Section 55 (1) has framed rules and occasions where delivery challan can be used. Following are the cases where issuing delivery challan is necessary:

  • When liquid gas is being transported, the weight of the gas that is being transported from the suppliers’ place is unknown.
  • Then commodities being transported for job work. Here are particular instances where delivery challan needs to be issued:
  1. If a job worker is receiving commodities from the Principal itself.
  2. If the goods are being transported between two job workers.
  3. If the Principal is receiving back the goods from the job worker.
  • When the commodities are being transported without any link to sales. For example, when the goods are supplied from one warehouse to another warehouse for storing.
  • If goods are transported for promotional purposes or exhibition activities, it is not allowed to treat these goods as “export” or supply. This is according to the CBI&C Circular No. 108/27/2019-GST purveyed on 18th July 2019. This transport must be done under delivery challan.
  • Another ruling of CGST and SGST Act, 2017, Section 55 (4) states that the commodity intended for sale is being transported but due to some reasons a tax invoice is not issued against the commodity, then the supplier can issue a delivery challan for the time being and later on after the delivery the tax invoice can be issued.

Business that needs delivery challan

Under the GST rule, some particular businesses need delivery challan. Here are the types of businesses that need delivery challan:

  • Good suppliers
  • Wholesalers
  • Manufacturers
  • Trading business
  • Warehouse owners

Delivery challan template format

There are some specific key components that every delivery challan is attributed with. Traders need to keep these in mind while creating a delivery challan format:

  • GSTIN number, name and address of the supplier.
  • Rendering of the goods.
  • HSN code of the commodity.
  • GSTIN number, name and address of the buyer (if registered).
  • The taxable amount of the commodity.
  • Applied GST amount, further divided into IGST, CGST, SGST, and GST cess.

A trader needs to keep these points in mind when creating a delivery challan. Delivery challan meaning a supplier must know the difference between both the invoice and a delivery challan to make use of both when the situation arises.